Rothschild Rails Against Bumi’s Bakrie Exit Plan as ‘Stitch-Up’

Nathaniel Rothschild, the financier who co-founded Bumi Plc, has vowed to fight a deal struck by the Indonesian coal producer’s two biggest shareholders giving Chairman Samin Tan control of almost half the company.

Bumi, which Rothschild established with the Bakrie Group in 2011, yesterday announced a plan valued at more than $500 million that would see it sever ties with the Indonesian family. The proposal, revised from an October deal, would result in Tan doubling his holding to 47.6 percent.

“This is another choreographed stitch-up between the Bakries and Samin Tan,” Rothschild, owner of 14.8 percent of London-based Bumi, said yesterday in a phone interview. The October plan “is a far better deal for minority shareholders. We don’t want the new proposal, we want the original proposal.”

Bumi has been at the heart of a battle for control between Rothschild, scion of a centuries-old British banking dynasty, and the Bakries, one of Indonesia’s wealthiest families. Both made rival proposals last year to unwind the $3 billion deal that brought them together in 2011. Tan said last month he has lost about $800 million on the value of his January 2012 purchase of 23.8 percent of Bumi from the Bakries for $1 billion.

Tan last week approached the Bakries, who own a palm oil-to-property empire founded in Sumatra in 1942, with a cash offer, the Bakrie Group said yesterday, without giving the terms. The Bakries have accepted the offer with conditions, and said “a total cash alternative adds weight to the unwinding process, and we hope minority shareholders will share this view.” Tan couldn’t be reached for comment yesterday.

General Offer

A condition of a purchase by Tan’s PT Borneo Lumbung Energi & Metal of the Bakries’ stake is that the London-based company’s independent shareholders waive the requirement for Borneo Lumbung to make a general offer, Bumi said yesterday. An independent board committee will assess the offer, it said.

“If you offer all shareholders the opportunity to buy those shares on the same terms, then I suppose that will be one way around it,” said Cato Stonex, a partner at Taube Hodson Stonex Partners LLP, which owns 2.2 percent of Bumi. “It is unlikely that they are going to get an exemption from making a full bid and to be able to dilute us all at the bottom.”

The plan Bumi and the Bakries put forward in October included a share swap resulting in the Bakries’ shares in the London-listed company being canceled. Talks continue and the “economic terms remain consistent” with the original plan, Bumi said.

More Delays

“This is all likely to only further delay the separation which has now been in the works for more than nine months and is unlikely to be resolved anytime soon,” Nomura International Plc analysts Matthew Kates and Ashraf Khan wrote in a note, referring to Tan’s proposed purchase of the Bakrie stake.

Rothschild, 41, yesterday proposed that the Bakries’ Bumi stake be offered to existing shareholders, rather than sold to Tan who could then underwrite the offer and be free to buy any stock not taken up. The announced proposal deprives investors of upside “just when thermal coal fundamentals are starting to improve,” Rothschild’s NR Investments Ltd. said in a statement.

A separation deal would mark the end of an almost two-year affiliation with the Bakries who would retain control of PT Bumi Resources, Indonesia’s biggest exporter of power station coal. The deal that brought the family to London started to sour last year amid board infighting, a slump in coal prices and financial probes in the U.K. and Indonesia.

Twin Investigations

The stock slumped 69 percent in London trading last year and has been suspended since April as Bumi continued an investigation into $201 million of missing funds at its other coal investment, PT Berau Coal Energy.

Bumi, noting recent press reports, yesterday said it is near an agreement to sell 29.2 percent of Bumi Resources to the Bakries as part a separation plan. The stake would be sold in two parts for a total of $508 million, people familiar with the matter told Bloomberg this week. Bumi is considering returning the funds to its shareholders as a special dividend, one of the people said.

“The board remains committed to delivering the separation transaction to shareholders on a value-accretive basis,” Bumi said yesterday.

Bumi’s stock has been halted from trading in London since April 19, and talks with the U.K.’s Financial Conduct Authority to end the suspension have focused on bolstering “internal systems and controls,” the company said June 21. The stock last closed at 259.3 pence on April 19, giving Bumi a market value of 625 million pounds.

“It would be virtually impossible for them to recommend a separation transaction to shareholders that is so clearly inferior to the one the very same independents were touting only weeks before,” Rothschild said of the independent Bumi board committee. “The minority investors can block it, should block it and demand a transaction that we thought was fixed.”